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Capstone Copper Corp T.CS

Alternate Symbol(s):  CSCCF

Capstone Copper Corp. is a copper producer operating in the Americas. It is engaged in the production of and exploration of base metals in the United States (US), Mexico, and Chile, with a focus on copper. The Company, through a wholly owned Chilean subsidiary, Mantos Copper S.A., owns and operates the Mantos Blancos mine, located 45 kilometers (km) northeast of Antofagasta, Chile and the 70%-owned Mantoverde mine, through a subsidiary, Mantoverde S.A., located 50 km southeast of Chanaral, Chile. It owns and operates the Pinto Valley mine located in Arizona, US, Cozamin mine located in Zacatecas, Mexico, and has a portfolio of exploration properties in Mexico. It also holds the fully permitted Santo Domingo copper-iron-gold-cobalt development project in the Atacama region of Chile, 35km northeast of Mantoverde. Through Compania Minera Sierra Norte S.A., it owns 100% of Sierra Norte, an iron oxide copper gold deposit located in Chile's Atacama Region, that spans over 7,000 hectares.


TSX:CS - Post by User

Comment by Evrytingisawsumon Apr 28, 2021 8:04am
183 Views
Post# 33080895

RE:TD $6.50 upgrade

RE:TD $6.50 upgrade

We have updated our estimates for the company's Q1/21 results.

Impact: POSITIVE

Solid start to the year. Capstone reported Q1/21 adjusted EBITDA of $119mm, above our estimate of $87mm and consensus of $85mm. The better-than-expected EBITDA result was driven by higher sales and lower site costs.

Production of 47.8mmlbs at C1 costs of $1.70/lb exceeded our estimate of 43.4mmlbs and $2.06/lb, respectively. The outperformance was driven by higher grades and throughput at Pinto Valley. Cozamin also realized the benefit of the completion of the one-way ramp with throughput materially higher q/q.

Long-term debt fully repaid. The strong operating performance resulted in record adjusted cash flows of $95mm, and we calculate the company generated $45.8mm of FCF in the quarter. Capstone has fully repaid its revolving credit facility in Q1 ($184.9mm), and is now in a net cash position of $45mm, including short-term investments.

2021 production guidance is unchanged at 175-190mmlbs copper at C1 cash costs of $1.75-1.90/lb. The company continues to expect its growth initiatives at both Cozamin and Pinto Valley to drive annual production towards 200mmlbs in 2022 and 2023. We are now modelling 186.3mmlbs of copper in 2021 at C1 cash costs of $1.75/lb and AISC of $2.63/lb.

Strong leverage to copper. At $4.00/lb copper, which is ~$0.50/lb below current spot prices, Capstone expects to generate ~$1bln of after-tax cash flow during 2021-2023, which is consistent with our modelling assumptions. Furthermore, at $4.00/lb copper, we expect Capstone to generate ~$543mm of FCF during 2021-2023 (excluding Santo Domingo) vs. our base case FCF assumption of $348mm using an average copper price of $3.54/lb.

Catalysts/milestones. Potential TSX-Index inclusion in June (~12mm shares of demand), conclusion of its ownership structure and financing plan for Santo Domingo by mid-year, and a technical report update on the PV optimization initiatives in H2/21.

TD Investment Conclusion

We are increasing our target price to C$6.50 and maintaining our BUY rating. Given Capstone's strong balance sheet and the tailwinds in the commodity markets, we expect the company to be well-positioned to deliver on its growth initiatives, including the Pinto Valley optimization and Santo Domingo project development.

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